20161013-辉立证券-Tisco_Financial_Group_12页_397kb

Tisco Financial Group Summary

Core Content

Tisco Financial Group is a Thai financial institution with its core business centered around Tisco Bank, which operates in retail and SME lending, corporate lending, retail deposit, private banking, bancassurance, cash management, and custodian services. The company's financial performance and outlook are detailed in the document, highlighting key metrics and trends for the third quarter of FY16 and the full year projections for FY16 and FY17.

Main Points

Financial Performance in 3QFY16

• Net Profit: Increased by 54.4% year-over-year (YoY) and 3.5% quarter-over-quarter (QoQ) to Bt1.2bn.
• Loan Loss Provisions: Dramatic drop in loan-loss provisions was the main reason for the YoY profit increase, primarily due to the large provisions set aside in 3QFY15 for SSI's debt.
• Fee and Non-Interest Income: Higher fee and non-interest income, along with a lower cost of funds, contributed to the strong profit growth.
• Interest Income: Declined by 4.8% YoY and 0.4% QoQ to Bt3,975mn.
• Interest Expense: Decreased by 22.5% YoY and 7.1% QoQ to Bt1,208mn.
• Net Interest Income: Increased by 5.7% YoY and 2.9% QoQ to Bt2,767mn.
• Net Fees and Service Income: Rose by 18.7% YoY and 18.2% QoQ to Bt1,407mn.
• NPLs: Continued to decline, reducing by Bt114mn to Bt6.9bn, but the NPL to loan ratio increased slightly to 3.04%.
• NIM (Net Interest Margin): Increased to 4% from 3.9% due to lower cost of funds and a higher proportion of high-yield loans.

Loan Trends

• Loan Shrinkage: Loans declined by 1.9% QoQ in 3QFY16, leading to a YTD contraction of 5% from end-FY15.
• HP Loan Books: Shrinking high-portfolio (HP) loan books were the primary cause of the contraction in overall lending.
• Loan Recovery Outlook: No signs of recovery in lending are expected in the near future.
• FY17 Loan Growth: Expected to be flat at best, with a potential for modest growth if vehicle sales exceed 800,000 units.

Profit Outlook

• FY16 Net Profit: Raised by 7.1% to Bt4.8bn, reflecting a bigger-than-expected drop in cost of funds.
• FY17 Net Profit: Forecast to rise modestly by 1.8% YoY to Bt4.9bn, with loan growth still expected to be slow.
• Dividend Forecast: Raised to Bt2.55/share for FY16 and Bt2.60/share for FY17.

Valuation and Rating

• Rating: Maintained at 'Neutral' with a FY17 target price of Bt52/share.
• Dividend Profile: Strong dividend yield, though no share price upside is expected from current levels.
• Loan-Loss Provisioning: Gradual drop in loan-loss provisions is expected, which could allow for earnings growth despite further loan contraction.
• Valuation Ratios:
  • P/B (Price-to-Book): 1.2x for FY17.
  • P/E (Price-to-Earnings): 8.4x for FY17.
  • Dividend Yield: 5.0% for FY17.
  • ROE (Return on Equity): 15.06% for FY17.

Key Information

Company Data

• Outstanding Shares (mn): 801
• Market Cap (Btmn): 41,634
• Market Cap (USDmn): 1,166
• 52-Week High/Low (Bt): 57 / 36.25
• 3M Average Daily Turnover (mn): 2.45
• Par Value (Bt): 10.00

Major Shareholders (as of 03 May 2016)

1. CHASE NOMINEES LIMITED: 14.4%
2. Thai NVDR: 10.3%
3. CDIB & Partners Investment Holding Pte Ltd: 10.0%

Key Financials (FYE Dec)

Key Financial Summary (3Q16)

• Revenue: Bt4,394mn
• PPP (Pre-Provisioning Profit): Bt2,677mn
• Net Profit: Bt1,250mn
• Assets: Bt265,922mn
• Liabilities: Bt235,905mn
• Equities: Bt30,018mn
• EPS (Bt): 1.56
• BVPS (Bt): 37.35
• NIM (%): 4.04

Peer Comparison (as of 13 October 2016)

Risk Factors

• Credit risk
• Interest rate risk
• Economics risk

Key Developments

• 2014: Penetrated into microfinance with the brand "Somwang".
• 2013: Developed a capital management plan and issued warrants for TSR.
• 2012: Collaborated with Deutsche Bank to establish "Deutsche Tisco Investment Advisory Company Limited".
• 2011: Launched Tisco Wealth, an investment advisory service.
• 2009: Expanded retail banking business with Tisco Leasing Co., Ltd.

Conclusion

Tisco Financial Group experienced strong net profit growth in 3QFY16 due to reduced loan-loss provisions and increased fee and non-interest income. Despite this, loan growth remains sluggish, and no immediate recovery is expected. The company's financial health is supported by a gradually improving net interest margin and a declining NPL ratio. The FY17 profit outlook is modest, with a focus on maintaining strong dividend payouts. The 'Neutral' rating reflects the company's strong dividend profile and gradual reduction in loan-loss provisions, though there is no expected share price upside.